Markets fell heavily yesterday after consistent gains earlier in the week, as Goldman Sachs (GS) posted a 13% drop to $160.7 on fraud charges brought by the Securities and Exchange Commission. The drop was the biggest one day fall in the stock's history. Technology stocks were also in the red with Google (GOOG) dropping $45 dollars or 7.5% to $550 on first quarter results.
The Dow Jones Industrial Average finished Friday down 125 points, or 1.1%, to 11,018. Despite the fall, the DOW showed its seventh week of gains. The S&P 500 Index fell 19.5 points, or 1.6%, to 1,192, below the key 1,200 technical level. The FTSE 100 index dropped 81 points, to 5,744.
The SEC, has accused Goldman Sachs and a London-based executive director, Fabrice Tourre, of failing to disclose information about a synthetic collateralized-debt obligation (CDO), related to subprime residential mortgage-backed securities. It also is said to have not disclosed the role that hedge fund Paulson & Co played in the portfolio-selection process and the fact that the fund was shorting the CDO. Investor's lost around $1 billion in the investment.
On the portfolio front it has been a relatively quiet week as I have trimmed long positions on the run up. Some shorts on the FTSE 100 and DOW placed yesterday morning could have been extraordinarily profitable following the Goldman news but were unfortunately not closed at the lows of the day. Its a waiting game for Contrarian Investor UK at the moment as I'm not rushing to commit extra funds into this market.
GW Pharma (GWP) - The portfolio's largest holding had a good end to the week with a 4.5% rise yesterday despite the market falls to finish at 114p. I am puzzled at what is driving this gain as the approval of the UK and Spanish national licences are not expected for Sativex for some weeks yet. May and June will be the months where the exciting news flow starts to come so its a question of watch and wait. Hopefully this will move up gradually over the next few weeks as the regulatory update in March hugely de-risked this share.
Nighthawk Energy (HAWK) - A short term trade was placed this week on news of a drilling update and director buys. Position closed at 29p.
Ithaca Energy (IAE ) - Following news from the appraisal well on the Stella field in the North Sea a position was initiated but not in the Contrarian Investor core portfolio as this will be a longer term story.
Showing posts with label Nighthawk energy. Show all posts
Showing posts with label Nighthawk energy. Show all posts
Saturday, April 17, 2010
Tuesday, April 13, 2010
Nighthawk Energy directors buy encouraging
Nighthawk Energy (HAWK) has moved up sharply since the weekend with two RNS's catching the eye. Yesterday's announcement confirmed that several "sweet spots" in the shale had been identified on 3D seismics. Secondly this morning a RNS stating that several directors including the MD David Bramhill had purchased stakes between 50,000 and 100,000. HAWK' s share price is currently up 8% at 28p to buy.
The fact that the Scottish Widows (Lloyds) stock sale overhang has now cleared means that the positive momentum is likely to continue.
The fact that the Scottish Widows (Lloyds) stock sale overhang has now cleared means that the positive momentum is likely to continue.
Sunday, February 28, 2010
Portfolio Update - February 28th 2010
A relatively benign week on the markets but a good month for equities in general. The FTSE 100 rose 76 points to 5,354 on Friday, whilst U.S. stocks finished modestly higher (DOW JONES Industrials 10,325 +4 points) to have their best month since November (DOW +2.6%, NASDAQ +4.2%, S&P 500 +1.5%, FTSE 100 +2.6% for the month)
On Friday, the U.S. Commerce Department reported that GDP grew at a 5.9% the fourth quarter of 2009, the fastest rate since the third quarter of 2003 confirming the the American economy is solidly moving out of recession. This compared with the U.K.’s revised GDP of 0.3%.
The portfolio was hit hard this week by the disappointing news from Nighthawk Energy (HAWK), highlighting the risks and rewards of investing in small cap stocks. Contrarian Investor UK is currently assessing some new ideas for the portfolio with a view to rebalancing to a more diversified portfolio.
Nighthawk Energy (HAWK) – On Tuesday, Nighthawk finally issued a more comprehensive report on the Jolly Ranch shale oil and gas play in the U.S.. The results were poor, with the field still producing little more than 150 barrels per day (BPD) despite promises as the Annual General Meeting (AGM) that production would be closer to 800-1000 by quarter one 2010. The horizontal drilling technique used on some of the wells to extract oil seems to have been relatively unsuccessful meaning that HAWK is looking at the economics of the field based on standard vertical drilling. The company had $18 million of cash and liquid assets left after the fund raising in 2009. Contrarian Investor UK sold his position on the news at 27p, with the stock finishing the week at 25p. A 30% loss was painful given the commitment in time to this company but I am concerned that the “proving up” of the Jolly shale oil field will take the company into late 2010 where cash resources will become stretched and a further fund raising will be necessary. It is also somewhat concerning that private partner Running Foxes, who currently fund 50% of the drilling work, may not have an appetite for continued high investment in Jolly. Although HAWK may decide to sell its Revere or Cisco Springs fields, this stock is now looking very high risk and I disappointed in the results from Jolly Ranch after the strong convictions expressed at the AGM by MD David Bramhill and Steve Tedesco (from partner Running Foxes). At 25p, HAWK may still produce a return for buyers at this level but although it may go to 40p, sub 20p may also be just round the corner for this company which seems to thrive on shareholder disappointment.
Falkland Oil drillers (Desire Petroleum, Falkland Oil and Gas, Borders and Southern) – The Falkland Oil explorers all slipped this week, as the Argentinean government continued to apply political pressure through the Rio Summit and U.N. for the British government to stop further drilling around the Islands. This political pressure has been to date unsuccessful but added to the relative risks of these shares. I continue to hold DES, FOGL and BOR on expectation of results from the Ocean Guardian rig in March despite all the volatility in these companies.
ITV (ITV) – ITV continues it’s move back up and finished at 54p, following a positive outlook from Scottish Television company STV (which was formerly known as SMG). STV chief executive, Rob Woodward, forecast that the national TV ad market was likely to be up between 4 and 8% year on year in April.
GW Pharma (GWP) – Approval for cannabis spray, Sativex, is still expected in Q1 and this remains Contrarian Investor U.K’s largest holding.
Amgen (AMGN) - A quiet week for Amgen with the stock finishing at $56. Further news on osteoporosis drug, Prolia, still awaited in quarter one 2010.
Micron Technology (MU) – The stock moved back over the $9 mark as the outlook for DRAM memory chips continue to improve in the the second half of 2010.
On Friday, the U.S. Commerce Department reported that GDP grew at a 5.9% the fourth quarter of 2009, the fastest rate since the third quarter of 2003 confirming the the American economy is solidly moving out of recession. This compared with the U.K.’s revised GDP of 0.3%.
The portfolio was hit hard this week by the disappointing news from Nighthawk Energy (HAWK), highlighting the risks and rewards of investing in small cap stocks. Contrarian Investor UK is currently assessing some new ideas for the portfolio with a view to rebalancing to a more diversified portfolio.
Nighthawk Energy (HAWK) – On Tuesday, Nighthawk finally issued a more comprehensive report on the Jolly Ranch shale oil and gas play in the U.S.. The results were poor, with the field still producing little more than 150 barrels per day (BPD) despite promises as the Annual General Meeting (AGM) that production would be closer to 800-1000 by quarter one 2010. The horizontal drilling technique used on some of the wells to extract oil seems to have been relatively unsuccessful meaning that HAWK is looking at the economics of the field based on standard vertical drilling. The company had $18 million of cash and liquid assets left after the fund raising in 2009. Contrarian Investor UK sold his position on the news at 27p, with the stock finishing the week at 25p. A 30% loss was painful given the commitment in time to this company but I am concerned that the “proving up” of the Jolly shale oil field will take the company into late 2010 where cash resources will become stretched and a further fund raising will be necessary. It is also somewhat concerning that private partner Running Foxes, who currently fund 50% of the drilling work, may not have an appetite for continued high investment in Jolly. Although HAWK may decide to sell its Revere or Cisco Springs fields, this stock is now looking very high risk and I disappointed in the results from Jolly Ranch after the strong convictions expressed at the AGM by MD David Bramhill and Steve Tedesco (from partner Running Foxes). At 25p, HAWK may still produce a return for buyers at this level but although it may go to 40p, sub 20p may also be just round the corner for this company which seems to thrive on shareholder disappointment.
Falkland Oil drillers (Desire Petroleum, Falkland Oil and Gas, Borders and Southern) – The Falkland Oil explorers all slipped this week, as the Argentinean government continued to apply political pressure through the Rio Summit and U.N. for the British government to stop further drilling around the Islands. This political pressure has been to date unsuccessful but added to the relative risks of these shares. I continue to hold DES, FOGL and BOR on expectation of results from the Ocean Guardian rig in March despite all the volatility in these companies.
ITV (ITV) – ITV continues it’s move back up and finished at 54p, following a positive outlook from Scottish Television company STV (which was formerly known as SMG). STV chief executive, Rob Woodward, forecast that the national TV ad market was likely to be up between 4 and 8% year on year in April.
GW Pharma (GWP) – Approval for cannabis spray, Sativex, is still expected in Q1 and this remains Contrarian Investor U.K’s largest holding.
Amgen (AMGN) - A quiet week for Amgen with the stock finishing at $56. Further news on osteoporosis drug, Prolia, still awaited in quarter one 2010.
Micron Technology (MU) – The stock moved back over the $9 mark as the outlook for DRAM memory chips continue to improve in the the second half of 2010.
Tuesday, February 23, 2010
Disapointing Nighthawk Energy update from Jolly Ranch project forces sale
Nighthawk Energy (HAWK) announced a further update from its Jolly Ranch shale oil/gas prospect this morning. The market was unimpressed with a 10% fall to 26.75p as the company issued very much a “jam tomorrow” story and this disappointed many short term traders. Although production is expected to ramp up from 150 barrels per day gross (BPD) to 1000 BPD by end 2010, 1000 BPD was originally talked about by end of 2009. It has been clearly stated by MD David Bramhil that Nighthawk is in the game of proving up the Jolly Ranch project not making it a producing asset at this stage. However, solid production flows from the test wells are needed to attract outside interest. The flows from the horizontal drilling seem to have disappointed since the company is now focused on marketing the project on the basis of the economics of vertical wells –“With these assumptions and taking account of all royalties and production taxes, plus applicable regional and federal taxes, the discounted cash flow over the life of the well has been estimated to beUS$4.7 million, providing a rate of return on the cost of the well of 330% on a discounted basis. On this basis, capital expenditure on the well pays back in less than six months”.
HAWK said this morning that $18 million of cash and liquid securities was still available but given the cash burn to date, it is unlikely that funds will be available after the fourth quarter of 2010 at these production rates. I believe a takeover is unlikely until 2011 when more robust production data is available. Although news on the Revere project is still awaited, the risks of HAWK now seem to significant given the longer term “proving up” story on the Jolly Ranch project and the patchy flow rates to date. Regrettably I have decided to “kill a weed” this morning and I have sold my holding in the company at a 30% loss to focus on other more short-medium term opportunities. Such is the way with shares, that it is hard to sell a loser. But my funds are better invested in stocks such as GW Pharmaceuticals (GWP). These small caps can be rich winners, but painful losers! When selling a stock, it is always right to look at what the future gain will be on your asset if you invested it elsewhere, not on what your current loss is.
HAWK said this morning that $18 million of cash and liquid securities was still available but given the cash burn to date, it is unlikely that funds will be available after the fourth quarter of 2010 at these production rates. I believe a takeover is unlikely until 2011 when more robust production data is available. Although news on the Revere project is still awaited, the risks of HAWK now seem to significant given the longer term “proving up” story on the Jolly Ranch project and the patchy flow rates to date. Regrettably I have decided to “kill a weed” this morning and I have sold my holding in the company at a 30% loss to focus on other more short-medium term opportunities. Such is the way with shares, that it is hard to sell a loser. But my funds are better invested in stocks such as GW Pharmaceuticals (GWP). These small caps can be rich winners, but painful losers! When selling a stock, it is always right to look at what the future gain will be on your asset if you invested it elsewhere, not on what your current loss is.
Monday, February 22, 2010
News flow from Desire Petroleum and Nighthawk Energy
Desire Petroleum (DES) began drilling on its prospect in the Falkland Islands this morning. It would be surprising not to get an RNS updating shareholders during this week. Falkland Oil and Gas (FOGL) and BHP's announcement on hiring of a deep water rig for their South Falklands prospects should also be due any week now.
The key seismic and production information from the Jolly Ranch and Revere projects is expected from Nighthawk Energy (HAWK) this week. Should either be a highly exciting or demoralising news release for HAWK shareholders!
Tuesday, February 16, 2010
New Edison research report highlights opportunities for Nighthawk Energy
Edison Investment Research Limited has published a report on Nighthawk Energy (HAWK). Although HAWK is a research client of Edison, the information gives some interesting insights on the company’s prospects and has a 12 month price target of 95p per share ($488m) with potential upside depending on news of £2 per share. This morning HAWK’s share price moved above 29p for the first time in several weeks as anticipation of forthcoming news on Jolly Ranch gathers pace. As this is a substantial holding for Contrarian Investor, this news is particularly pertinent for the portfolio. The undemanding current market capitalisation appears to indicate that the opportunity for significant share price appreciation should not be underestimated if Jolly Ranch and Revere deliver anything close to expectations.
Some highlights from the report:
“The most important in terms of potential scale is the shale oil play, Jolly Ranch, in eastern Colorado. This is broadly analogous to the Bakken plays in Montana and North Dakota and is a potential company maker. In 2009 Schlumberger estimated the P50 oil-in-place fir around 2/3 of the Jolly Ranch project at 1.46 billion barrels of oil equivalent gross. There is the potential for positive news flow in 2010 reflecting the drilling programme, 3d seismic surveys and an anticipated upward trend in production from nominal levels in 2009 to possibly over 1000 barrels a day gross in the coming months. The Revere waterflood project in Kansas/Missouri could also see significant production gains in the 2010 driven by development activity,”
“We see scope for a pre-tax profit of £0.5m on sales revenues of $3.1 m based on an average production rate of 140 boe/d. There is inevitably a degree of uncertainty about the outlook for 2011 and 2012 but we believe Nighthawk should be comfortably profitable at the EBITDA and probably the pre-tax levels based on our production forecasts.”
“As of end of January 2010 we believe the cash balance was about $17m which is adequate to comfortably finance the current development programme”
“We believe the key items of news in 2010 will relate to rising production, particularly at Jolly Ranch. With this in mind, it is likely that there will be regular updates on production probably at the end of each quarter. Near term in late February and March, we also believe that there will be news surrounding the following issues: Jolly Ranch seismic survey results along with potential new drilling targets, Jolly Ranch operational update, Revere operational update including the status of production and resources at Xenia”
“Currently we believe production is running at about 360boe/d gross or approaching 200boe/d net. A sharp increase in production is anticipated in the coming months. This reflects intensifying well test and development work at Jolly Ranch and Revere. We believe that it is possible that gross production across the JV could be running at about 1,250boe/d by end of 2010 and perhaps 1800boe/d by late 2011.”
“Jolly ranch has the potential to be a highly lucrative project. The pre-tax netback could be in the region of $50/bbl after allowing for royalty payments, severance costs and the cost of logistics and lifting. Assuming a cost per vertical well of $1m and production per well of 100b/d, the pre-tax payback period would be 200 days. Allowing for state and federal tax the payback would be 333 days. “
“WTI (West Texas Intermediate) oil would probably have to fall below $35/bbl before a prospective Jolly Ranch project would hit approximate fully accounted break even. On a variable cost basis, break-even might be around $25/bbl.”
“Assuming a similar success rate to that achieved historically (Revere - on the Devon and Buchanan properties), it would not be surprising to see production up to 300bpe/d gross by end 2010 and perhaps 400boe/d by end 2011.
“Since July 2009, Nighthawk has traded between 27p and 48p/share. Trading at around 36p in the second week of January 2010,Nighthawk was up by about 33% from a depressed base at the end of 2008. This was a major underperformance compared with the approximate 122% gain in the AIM Oil and Gas Price index over the same period. The weak performance over the past year or so, we believe, largely reflects heavy cash calls combined with disappointment at the pace of bringing production on stream and defining the reserve base. Oilfield development however, is a time consuming and costly task even in a favourable operating environment and requires patience. Given that production will probably gain momentum in the coming months, investor perceptions could turn considerably more positive during 2010. Ultimately we believe that a decisive change in perceptions will require evidence of a substantial reserve base, as indicated earlier. When this happens or arguably somewhat before, the larger independents are likely to become increasingly interested in Nighthawk/RFP or in particular assets owned by the joint venture. “
“Nighthawk’s current market cap of about £91m is in large part under pinned by the Cisco Springs project plus the investment portfolio alone. The independently assessed 2p reserves of 24mmboe, along with the installed production and logistical infrastructure, should be worth at least $5/boe based on sector data. Allowing another £2m for the portfolio and the implied valuation for the other projects is a mere £12m”.
Source: Edison Investment Feb 15th 2010
Some highlights from the report:
“The most important in terms of potential scale is the shale oil play, Jolly Ranch, in eastern Colorado. This is broadly analogous to the Bakken plays in Montana and North Dakota and is a potential company maker. In 2009 Schlumberger estimated the P50 oil-in-place fir around 2/3 of the Jolly Ranch project at 1.46 billion barrels of oil equivalent gross. There is the potential for positive news flow in 2010 reflecting the drilling programme, 3d seismic surveys and an anticipated upward trend in production from nominal levels in 2009 to possibly over 1000 barrels a day gross in the coming months. The Revere waterflood project in Kansas/Missouri could also see significant production gains in the 2010 driven by development activity,”
“We see scope for a pre-tax profit of £0.5m on sales revenues of $3.1 m based on an average production rate of 140 boe/d. There is inevitably a degree of uncertainty about the outlook for 2011 and 2012 but we believe Nighthawk should be comfortably profitable at the EBITDA and probably the pre-tax levels based on our production forecasts.”
“As of end of January 2010 we believe the cash balance was about $17m which is adequate to comfortably finance the current development programme”
“We believe the key items of news in 2010 will relate to rising production, particularly at Jolly Ranch. With this in mind, it is likely that there will be regular updates on production probably at the end of each quarter. Near term in late February and March, we also believe that there will be news surrounding the following issues: Jolly Ranch seismic survey results along with potential new drilling targets, Jolly Ranch operational update, Revere operational update including the status of production and resources at Xenia”
“Currently we believe production is running at about 360boe/d gross or approaching 200boe/d net. A sharp increase in production is anticipated in the coming months. This reflects intensifying well test and development work at Jolly Ranch and Revere. We believe that it is possible that gross production across the JV could be running at about 1,250boe/d by end of 2010 and perhaps 1800boe/d by late 2011.”
“Jolly ranch has the potential to be a highly lucrative project. The pre-tax netback could be in the region of $50/bbl after allowing for royalty payments, severance costs and the cost of logistics and lifting. Assuming a cost per vertical well of $1m and production per well of 100b/d, the pre-tax payback period would be 200 days. Allowing for state and federal tax the payback would be 333 days. “
“WTI (West Texas Intermediate) oil would probably have to fall below $35/bbl before a prospective Jolly Ranch project would hit approximate fully accounted break even. On a variable cost basis, break-even might be around $25/bbl.”
“Assuming a similar success rate to that achieved historically (Revere - on the Devon and Buchanan properties), it would not be surprising to see production up to 300bpe/d gross by end 2010 and perhaps 400boe/d by end 2011.
“Since July 2009, Nighthawk has traded between 27p and 48p/share. Trading at around 36p in the second week of January 2010,Nighthawk was up by about 33% from a depressed base at the end of 2008. This was a major underperformance compared with the approximate 122% gain in the AIM Oil and Gas Price index over the same period. The weak performance over the past year or so, we believe, largely reflects heavy cash calls combined with disappointment at the pace of bringing production on stream and defining the reserve base. Oilfield development however, is a time consuming and costly task even in a favourable operating environment and requires patience. Given that production will probably gain momentum in the coming months, investor perceptions could turn considerably more positive during 2010. Ultimately we believe that a decisive change in perceptions will require evidence of a substantial reserve base, as indicated earlier. When this happens or arguably somewhat before, the larger independents are likely to become increasingly interested in Nighthawk/RFP or in particular assets owned by the joint venture. “
“Nighthawk’s current market cap of about £91m is in large part under pinned by the Cisco Springs project plus the investment portfolio alone. The independently assessed 2p reserves of 24mmboe, along with the installed production and logistical infrastructure, should be worth at least $5/boe based on sector data. Allowing another £2m for the portfolio and the implied valuation for the other projects is a mere £12m”.
Source: Edison Investment Feb 15th 2010
Saturday, February 13, 2010
Portfolio Update - February 13th 2010
Falklands Oil stocks (Desire Petroleum DES, Falklands Oil and Gas FOGL, Borders and Southern BOR) - Plenty of controversy in the Falkland Islands this week, with The Thor Leader,a ship carrying pipes made by the Techint group in Argentina being stopped in the southern port of Campana because of allegations by the Argentinian government that it was "illegally" supplying drilling equipment to the Falklands.Techint, the world's biggest producer of seamless steel tubing for the oil industry, denied that the equipment was even bound for the Falklands and said it was going to clients in the Mediterranean. The share prices of DES, FOGL and BOR slid on the news but not alarmingly and were more hurt by the strengthening dollar's impact on the price of oil. The Ocean Guardian rig should arrive in the Falklands next week all being well. Continuing to hold all these stocks and anticipating significant volatility as drilling starts for Desire Petroleum.
Coal of Africa (CZA) - Again broadly flat this week at 130p. No news but an interesting interview with Arcellor Mital in Mining weekly which own a stake in CZA and have been touted as being in the game to take over the company - CEO Nonkululeko Nyembezi-Heita said on Wednesday that the group was redoubling its efforts to secure control of additional iron-ore. The decision was aligned to a group strategy of lowering costs through resource ownership rather than to any security of supply concerns, as there was sufficient domestic capacity available for purchase. "We are not concerned about accessing iron-ore, we are concerned about having control over than iron-ore," she explained, adding that the same was true for coal, which underpinned its decision to invest in Coal of Africa.The company requires 10-million tons of iron-ore yearly to meet its annual nameplate steelmaking capacity of 8-million tons. It is currently able to source more than 9-million of that need on favourable terms, paying market-related prices for the balance. However, if it were to grow its capacity, the company would aim to do so in a way that it matched any steelmaking expansion, with an expansion of its upstream resources. "We are now redoubling efforts to be self-sufficient in iron-ore and coal," Nyembezi-Heita explained, adding that the group's loss of participation rights in Sishen South meant that a new approach would have to be pursued. She indicated that the company was ready to partner with BEE explorers in pursuing new iron-ore opportunities in South Africa. Similarly, it would be keen to participate in projects able to produce hard coking coal. At full capacity, the group would consume about 1,8-million of coal yearly.
Nighthawk Energy (HAWK) - Having broken through the 30p mark last week, HAWK is oscillating between 27p and 30p as further news from the Jolly Ranch project is eagerly awaited by investors. The announcement that Lloyds sold a tranche of their holding is the reason for the downward pressure in recent weeks, and hopefully this overhang of stock is now cleared. Positive news from the company's shale oil project is now needed.
ITV (ITV) - ITV closed down around 50p this week as BSkyB finally placed a 10% holding in the market. The position is now down around 10% from the but price. However, the clearance of the uncertainty about the Sky scale now opens the door for a potential take over of this company sometime in the next 12 months as revenues recover.
GW Pharma (GWP) - Little movement this week as news on the Decentralised Procedures for the EU registration of Sativex is still awaited. This is Contrarian Investor's largest holding given the odds of a successful approval seem signficantly higher than a rejection given the strong clinical trial results in multiple sclerosis patients.
Amgen (AMGN) - Despite another positive clinical trial for osteoporosis drug, Prolia, Amgen slipped this week to close around $56 as the pharma sector as a whole was unloved by investors. Holding for news on EU Prolia approval.
Micron Technology (MU) - Micron stock remained at around the $8.5 level as it announced an acquisition of Numonyx for $1.2 billion in stock (see previous article from earlier in the week). Holding
Intel (INTC) - A rise in Intel to around $20.5 on Friday gave an opportunity to sell some of the position bought at $19.
Coal of Africa (CZA) - Again broadly flat this week at 130p. No news but an interesting interview with Arcellor Mital in Mining weekly which own a stake in CZA and have been touted as being in the game to take over the company - CEO Nonkululeko Nyembezi-Heita said on Wednesday that the group was redoubling its efforts to secure control of additional iron-ore. The decision was aligned to a group strategy of lowering costs through resource ownership rather than to any security of supply concerns, as there was sufficient domestic capacity available for purchase. "We are not concerned about accessing iron-ore, we are concerned about having control over than iron-ore," she explained, adding that the same was true for coal, which underpinned its decision to invest in Coal of Africa.The company requires 10-million tons of iron-ore yearly to meet its annual nameplate steelmaking capacity of 8-million tons. It is currently able to source more than 9-million of that need on favourable terms, paying market-related prices for the balance. However, if it were to grow its capacity, the company would aim to do so in a way that it matched any steelmaking expansion, with an expansion of its upstream resources. "We are now redoubling efforts to be self-sufficient in iron-ore and coal," Nyembezi-Heita explained, adding that the group's loss of participation rights in Sishen South meant that a new approach would have to be pursued. She indicated that the company was ready to partner with BEE explorers in pursuing new iron-ore opportunities in South Africa. Similarly, it would be keen to participate in projects able to produce hard coking coal. At full capacity, the group would consume about 1,8-million of coal yearly.
Nighthawk Energy (HAWK) - Having broken through the 30p mark last week, HAWK is oscillating between 27p and 30p as further news from the Jolly Ranch project is eagerly awaited by investors. The announcement that Lloyds sold a tranche of their holding is the reason for the downward pressure in recent weeks, and hopefully this overhang of stock is now cleared. Positive news from the company's shale oil project is now needed.
ITV (ITV) - ITV closed down around 50p this week as BSkyB finally placed a 10% holding in the market. The position is now down around 10% from the but price. However, the clearance of the uncertainty about the Sky scale now opens the door for a potential take over of this company sometime in the next 12 months as revenues recover.
GW Pharma (GWP) - Little movement this week as news on the Decentralised Procedures for the EU registration of Sativex is still awaited. This is Contrarian Investor's largest holding given the odds of a successful approval seem signficantly higher than a rejection given the strong clinical trial results in multiple sclerosis patients.
Amgen (AMGN) - Despite another positive clinical trial for osteoporosis drug, Prolia, Amgen slipped this week to close around $56 as the pharma sector as a whole was unloved by investors. Holding for news on EU Prolia approval.
Micron Technology (MU) - Micron stock remained at around the $8.5 level as it announced an acquisition of Numonyx for $1.2 billion in stock (see previous article from earlier in the week). Holding
Intel (INTC) - A rise in Intel to around $20.5 on Friday gave an opportunity to sell some of the position bought at $19.
Saturday, February 6, 2010
Portfolio Review of the week - February 6th 2010
A tough week for the Contrarian Investor UK portfolio this week as global markets fell heavily on sovereign debt concerns in countries such as Greece. The DOW Jones Industrials briefly fell as low as 9850 yesterday before staging a strong recovery in the last hour of trading to finish higher and back over the 10,000 level. Unfortunately, some long bets on the DOW were closed out at the lows , which was frustrating given the rebound. As I talk about shortly, the investment thesis for the holdings in the portfolio are robust and news flow is expected for most of the holdings in the coming weeks which should be a catalyst for share price appreciation. A sell off in the market that we have seen in the last 2 weeks is a positive development given we are now back in the “good value” zone after the rises in January looked unsustainable and stretched the prices of many stocks. The portfolio is now positioned for any change to a more positive sentiment.
Coal of Africa (CZA) – Finally the news that has been awaited for the last 4 months came through with the South African Government granting the new mining order for the Vele coking coal project. Although the share price initially responded well with a 23% one day rise to 148p, the large falls in global stock markets throughout the latter part of the week and rumours that fellow Coal stock, GCM, were selling down their holding meant that CZA finished the week at 133p, barely unchanged. Based on fundamentals CZA looks very solid – rising prices for metallurgical and thermal coal, increasing production coming on stream from Mooiplaats and now Vele, the acquisition of NuCoal brings on stream further capacity, good off take agreements with the likes of Arcellor Mittal (who own a stake in Coal of Africa). Continuing to hold.
GW Pharma (GWP) - Remarkably robust given the overall market picture, with a small fall to 87p. Sativex Cannabis spray regulatory approval in Europe in final stages. News expected in Q1 2010.
Falkland Islands Oil Shares (Falklands Oil and Gas (FOGL), Desire Petroleum (DES), Borders and Southern Petroleum (BOR) ) - A strengthening in the U.S. dollar this week due to fears about debt default in Portgual, Spain, Italy and Greece sent commodities into free fall this week with WTI Crude Oil dipping below $70 on Friday (after being above $80 in January). In addition, posturing by the Argentininian government about the ownership of the Falklands added to the general uncertainty. The Ocean Guardian Rig hired by Desire Petroleum is due to arrive in the Falklands in the next week or so with drilling due to start mid-February. News from Falklands Oil and Gas (which has a farm in deal with BHP Billiton) on a potential sharing of Ocean Guardian is expected in the next couple of weeks with further news on a deep water rig needed to drill in the deeper waters of the South Falklands basin also on the horizon. Despite heavy falls in the Falklands Islands shares this week, with the rush out of oil stocks and riskier assets, imminent news from the drilling campaign should drive prices higher.
ITV (ITV) – TV company, ITV dropped to 53p this week on the general market weakness. The outlook for TV revenues is solid in 2010 and the management team of Crozier and Norman is looking to streamline the business and review the ongoing strategy of the business. Holding.
Nighthawk Energy (HAWK) – HAWK broke through the long term resistance of 30p this week on the weakness in the oil price and now stands at lows last seen during the March 2009 lows at 27p. Despite reasonably positive news from the Jolly Ranch project last week, and confirmation that substantial news on the field would be released this week, the shares continue to take a tumble. The fundamental investment thesis for HAWK, namely the Jolly Ranch and Revere prospects is unchanged. Though Contrarian Investor UK is disappointed in the short term performance, I will continue to hold as news flow does not support this continued erosion in the share price.
Amgen (AMGN) - The stock price fell from close to $60 earlier in the week to finish at $57.5 as sentiment on pharma stocks was not helped by disappointing results from Pfizer (PFE) and Astra Zeneca (AZN). News on osteoporosis drug, Prolia, is expected in Q1 or early Q2. Holding.
Intel (INTC) and Micron (MU) – Semi conductor stocks took a hammering early in the week with Micron falling close to $8 and Intel dipping below $19. Despite the short term weakness, long term fundamentals look positive for chips consumption in both the consumer and business enterprise segments.
Coal of Africa (CZA) – Finally the news that has been awaited for the last 4 months came through with the South African Government granting the new mining order for the Vele coking coal project. Although the share price initially responded well with a 23% one day rise to 148p, the large falls in global stock markets throughout the latter part of the week and rumours that fellow Coal stock, GCM, were selling down their holding meant that CZA finished the week at 133p, barely unchanged. Based on fundamentals CZA looks very solid – rising prices for metallurgical and thermal coal, increasing production coming on stream from Mooiplaats and now Vele, the acquisition of NuCoal brings on stream further capacity, good off take agreements with the likes of Arcellor Mittal (who own a stake in Coal of Africa). Continuing to hold.
GW Pharma (GWP) - Remarkably robust given the overall market picture, with a small fall to 87p. Sativex Cannabis spray regulatory approval in Europe in final stages. News expected in Q1 2010.
Falkland Islands Oil Shares (Falklands Oil and Gas (FOGL), Desire Petroleum (DES), Borders and Southern Petroleum (BOR) ) - A strengthening in the U.S. dollar this week due to fears about debt default in Portgual, Spain, Italy and Greece sent commodities into free fall this week with WTI Crude Oil dipping below $70 on Friday (after being above $80 in January). In addition, posturing by the Argentininian government about the ownership of the Falklands added to the general uncertainty. The Ocean Guardian Rig hired by Desire Petroleum is due to arrive in the Falklands in the next week or so with drilling due to start mid-February. News from Falklands Oil and Gas (which has a farm in deal with BHP Billiton) on a potential sharing of Ocean Guardian is expected in the next couple of weeks with further news on a deep water rig needed to drill in the deeper waters of the South Falklands basin also on the horizon. Despite heavy falls in the Falklands Islands shares this week, with the rush out of oil stocks and riskier assets, imminent news from the drilling campaign should drive prices higher.
ITV (ITV) – TV company, ITV dropped to 53p this week on the general market weakness. The outlook for TV revenues is solid in 2010 and the management team of Crozier and Norman is looking to streamline the business and review the ongoing strategy of the business. Holding.
Nighthawk Energy (HAWK) – HAWK broke through the long term resistance of 30p this week on the weakness in the oil price and now stands at lows last seen during the March 2009 lows at 27p. Despite reasonably positive news from the Jolly Ranch project last week, and confirmation that substantial news on the field would be released this week, the shares continue to take a tumble. The fundamental investment thesis for HAWK, namely the Jolly Ranch and Revere prospects is unchanged. Though Contrarian Investor UK is disappointed in the short term performance, I will continue to hold as news flow does not support this continued erosion in the share price.
Amgen (AMGN) - The stock price fell from close to $60 earlier in the week to finish at $57.5 as sentiment on pharma stocks was not helped by disappointing results from Pfizer (PFE) and Astra Zeneca (AZN). News on osteoporosis drug, Prolia, is expected in Q1 or early Q2. Holding.
Intel (INTC) and Micron (MU) – Semi conductor stocks took a hammering early in the week with Micron falling close to $8 and Intel dipping below $19. Despite the short term weakness, long term fundamentals look positive for chips consumption in both the consumer and business enterprise segments.
Friday, February 5, 2010
U.S. employment data casts further shadow on the market
The U.S. non-farm payrolls employment dropped by 20,000 in January, compared with an expected increase of 15,000. But the unemployment rate unexpectedly moved lower to 9.7%, compared with expectations of 10%. The Dow industrials was recently down 31 pts to 9972 after the news which highlights the fragility of the U.S. labour market and potential weakness of the economic recovery.
On significant weakness in oil stocks, position increased in Nighthawk Energy at 27p, which fell 7% on the day. Overall the portfolio has suffered steep falls this week, particularly in speculative stocks.
On significant weakness in oil stocks, position increased in Nighthawk Energy at 27p, which fell 7% on the day. Overall the portfolio has suffered steep falls this week, particularly in speculative stocks.
Sunday, January 31, 2010
Portfolio Update - 30th January 2010. Market weakness makes swimming against tide tough!
Falkland Oil and Gas (FOGL), Desire Petroleum (DES), Borders and Southern (BOR) – All Falkland Oil shares have fallen this week on oil price weakness and investor fight from riskier assets. (As an aside, my contrarian short play on Emerging makets would have eventually played out, after 3 weeks of heavy falls. Frustrating to have closed the shorts just before the drops). Having trimmed by positions as euphoria in the Falklands Oil story hit fever pitch two weeks ago, I have topped up this week on FOGL. Continuing to hold as Desire’s Ocean Guardian rig is due to arrive in the Falklands shortly and drilling will start by mid-February.
Nighthawk (HAWK) – Despite an update on the Jolly Ranch project (which said that the real news was due in February on the status of the drilling campaign), the share price remains stubbornly subdued at 32p. News on the water flooding at the Revere project is also anticipated. Holding at 31.5p.
Coal of Africa (CZA) – News that the acquisition of South Africa coal producer, NuCoal , was completed was not enough to give any positive momentum to the share price which finished the week at 118p. NuCoal should produce 4.2 million tonnes of coal per year. The lack of clarity on the approval process for the Vele project is still unnerving investors despite the fact that the company said it is accelerating capex on the project using some of the proceeds from the placing in October 2009. CZA confirmed that it would commence production of export quality coal in this quarter from it's Mooiplaats mine. Holding
GW Pharma (GWP) – The share price slipped a little this week as the markets generally took a tumble. Position increased on this weakness. Holding for approval news on the cannabis spray for MS, Sativex.
ITV (ITV) – News that ex Royal Mail boss Adam Crozier was appointed as Chief Executive did not cause much excitement in ITV’s stock price. Continuing to hold on expected recovery in TV revenues, hoped deregulation in TV market pricing and product placement.
Amgen (AMGN) – Despite heavy falls in the U.S. markets last week, Amgen had a good week, rising above $58. Some profits taken at $58.5 but continuing to hold core position on anticipation of Prolia (osteoporosis drug) approval in EU in this half of 2010.
INTEL (INTC) – After selling most of the position prior to the results at over $21, weakness in the semiconductor sector this week gave a buying opportunity at below $19 and therefore have reinitiated several positions.
Micron Technology (MU) – The worst performer of the week, having hit close to $11 3 weeks ago, the stock continues to slide close to $8.7 and with an average buy position of just below $10 this is showing a loss. The recent legal settmement between Samsung and Rambus did not help sentiment but concerns that Samsung may ramp up DRAM production or that inventories will rise have not helped the direction of the stock in recent days. Continuing to hold but on review.
Google (GOOG) – Position close at $555 after Q4 results disappointed markets with a fall from over $580. Stock now at $529 and looking at re-entry point.
JP Morgan (JPM) – Position initiated at $39. JPM is one of the better plays in the U.S. financial sector and has fallen heavily in the last 2 weeks from $43-44 range.
Nighthawk (HAWK) – Despite an update on the Jolly Ranch project (which said that the real news was due in February on the status of the drilling campaign), the share price remains stubbornly subdued at 32p. News on the water flooding at the Revere project is also anticipated. Holding at 31.5p.
Coal of Africa (CZA) – News that the acquisition of South Africa coal producer, NuCoal , was completed was not enough to give any positive momentum to the share price which finished the week at 118p. NuCoal should produce 4.2 million tonnes of coal per year. The lack of clarity on the approval process for the Vele project is still unnerving investors despite the fact that the company said it is accelerating capex on the project using some of the proceeds from the placing in October 2009. CZA confirmed that it would commence production of export quality coal in this quarter from it's Mooiplaats mine. Holding
GW Pharma (GWP) – The share price slipped a little this week as the markets generally took a tumble. Position increased on this weakness. Holding for approval news on the cannabis spray for MS, Sativex.
ITV (ITV) – News that ex Royal Mail boss Adam Crozier was appointed as Chief Executive did not cause much excitement in ITV’s stock price. Continuing to hold on expected recovery in TV revenues, hoped deregulation in TV market pricing and product placement.
Amgen (AMGN) – Despite heavy falls in the U.S. markets last week, Amgen had a good week, rising above $58. Some profits taken at $58.5 but continuing to hold core position on anticipation of Prolia (osteoporosis drug) approval in EU in this half of 2010.
INTEL (INTC) – After selling most of the position prior to the results at over $21, weakness in the semiconductor sector this week gave a buying opportunity at below $19 and therefore have reinitiated several positions.
Micron Technology (MU) – The worst performer of the week, having hit close to $11 3 weeks ago, the stock continues to slide close to $8.7 and with an average buy position of just below $10 this is showing a loss. The recent legal settmement between Samsung and Rambus did not help sentiment but concerns that Samsung may ramp up DRAM production or that inventories will rise have not helped the direction of the stock in recent days. Continuing to hold but on review.
Google (GOOG) – Position close at $555 after Q4 results disappointed markets with a fall from over $580. Stock now at $529 and looking at re-entry point.
JP Morgan (JPM) – Position initiated at $39. JPM is one of the better plays in the U.S. financial sector and has fallen heavily in the last 2 weeks from $43-44 range.
Tuesday, January 26, 2010
Nighthawk Energy Update fails to ignite share price
Nighthawk Energy (HAWK) today updated investors on their key Jolly Ranch project in Colorodo. Unfortunately the market seems to have been signficantly underwhelmed, with an initial rise being followed by a 2.6% fall to 33.25p.
Todays RNS stated that the results to date "reinforcing confidence in the financial viability of the Jolly Ranch asset". David Bramhill (Managing Director) said that "We continue to be encouraged by the appraisal drilling results. Strong progress has been made and our understanding of the project has evolved."
On the face of it, the results seem to be pointing in the right direction. The 15 wells drilled to date on Jolly Ranch have encountered over 150 oil bearing horizons in conventional and non-conventional zones. The Craig 4-33 well has been tested at an average rate of 130 barrels of oil per day (bopd) over a sustained two-week period and is now set to be placed on full production. Three further wells, Craig 10-28, Craig 12-28 and Craig 12-33 are currently undergoing completion and are expected to be placed on production in early February. An additional well, Craig 15-32H will undergo mechanical remediation after three of its four zones were sand fracced with oil.
Patience seems to be required with the real action due to start in February. The RNS today, promised share holder updates on a regular basis. As well as Jolly Ranch the Revere Water Flooding project results are still awaited. Things seem to be proceeding to plan, and I will continue to hold HAWK shares for further drilling updates which may validate the oil in place predictions released in July 2009 of some 1.5 billion barrels of oil in place.
Todays RNS stated that the results to date "reinforcing confidence in the financial viability of the Jolly Ranch asset". David Bramhill (Managing Director) said that "We continue to be encouraged by the appraisal drilling results. Strong progress has been made and our understanding of the project has evolved."
On the face of it, the results seem to be pointing in the right direction. The 15 wells drilled to date on Jolly Ranch have encountered over 150 oil bearing horizons in conventional and non-conventional zones. The Craig 4-33 well has been tested at an average rate of 130 barrels of oil per day (bopd) over a sustained two-week period and is now set to be placed on full production. Three further wells, Craig 10-28, Craig 12-28 and Craig 12-33 are currently undergoing completion and are expected to be placed on production in early February. An additional well, Craig 15-32H will undergo mechanical remediation after three of its four zones were sand fracced with oil.
Patience seems to be required with the real action due to start in February. The RNS today, promised share holder updates on a regular basis. As well as Jolly Ranch the Revere Water Flooding project results are still awaited. Things seem to be proceeding to plan, and I will continue to hold HAWK shares for further drilling updates which may validate the oil in place predictions released in July 2009 of some 1.5 billion barrels of oil in place.
Saturday, January 23, 2010
Portfolio Update January 23rd 2010
Falkland Oil and Gas (FOGL) – A volatile week for the Falkland Islands oil exploration companies. For example, FOGL peaked the week at 182p (where profits were taken) and finished Friday at 166p. Following an initial sale, the position was increased at 162p. The Ocean Guardian Rig is now off the coast of Brazil and is expected to arrive in the Falklands in the next 2 weeks. Drilling for Desire Petroleum (DES) will commence by mid-February. Announcements of rig sharing with Rockhopper (RKH) and potentially BHP/FOGL are expected any time soon. With rig arrival, it is expected that publicity for these oil stocks will drive prices higher and investors scramble on board. With these type of shares, its “buy on the rumour, sell on the fact”.
Borders and Southern Petroleum (BOR) and Desire petroleum (DES) – Position continue to be held in these Falkland plays for the reasons above.
GW Pharma (GWP) – Position increased this week as news on Sativex approval continues to be sought.
Coal of Africa (CZA) - Operational update expected any day. News on Vele mine approval anticipated. Position trimmed but still holding.
Coal of Africa (CZA) - Operational update expected any day. News on Vele mine approval anticipated. Position trimmed but still holding.
ITV (ITV) – With the General Election in the U.K. and World Cup expected to boost TV revenues from the very low levels of 2009, this continues to be a hold. The negotiations for the Contract Rights Renewal are ongoing with the Competition Commission and OFCOM, the formula that dictates ITV’s ad rates. It is widely expected that the rules, which were created at the formation of ITV in 2003 by the merger of Carlton and Granada, will be relaxed. Potential upside from any relaxation in the rules for Product Placement in programming could generate a potential £100 million plus in additional revenues. Though debt is fairly hefty at over £700 million but this has been refinanced during 2009 but it is expected that aggressive cost cutting led by new Chairman Archie Norman should bring this under control. At 57p, ITV is below analyst targets of 70p and may still be a takeover target.
Nighthawk Energy (HAWK) - Little movement this week, closing at 32p. Holding for drilling update.
Amgen (AMGN) – Despite the significant falls in the Dow Jones Industrial average in the latter part of the week, Amgen remained relatively resilient at $56.6 as a Republican Victory in a Senate Election made Obama’s healthcare reform programme less likely to proceed drove up pharmaceutical stocks. Holding.
Google (GOOG) - A trade in Google prior to the results did not produce positive results with a fall from $580 to $550 during the course of yesterday. Decision to sell under review.
Intel (INTC) – Positions trimmed during the week on Nasdaq strength on Monday and Tuesday. Holding small position
Micron (MU) - A very poor week for Micron with a fall from close to $11 to $9.13 as the semi conductor sector fell away at the end of the week. Holding but position at loss with purchases averaging $10.2.
Saturday, January 16, 2010
Portfolio Update January 16th 2010
INTEL (INTC) - After the market close Thursday, the chip manufacturer announced better-than-expected fourth-quarter earnings and a strong outlook for the year ahead. Despite rising after hours yesterday, they finished 3.2% down at $20.80. With a forward p/e of 13 and with the company's 2.7% dividend yield supported by $12.9 billion in cash on its balance sheet, with just $2.4 billion in debt, INTC looks strong for 2010. After selling 50% of my stock prior to the results, bought back in yesterday. Looking for $22-23 in short term.
AMGEN (AMGN) - The stock traded in a narrow $55-57 range this week after guiding down estimates for 2010 earlier in the week. Holding on news of osteoporosis drug, Prolia in Europe.
MICRON (MU) - Have traded MU, selling several times above $10.8 and have bought back at $10.1. With memory chip prices improving, Micron is postioned well for the semiconductor recovery.
JP MORGAN (JPM) - Position sold Thursday prior to Friday results. JPM finished down 2.26% at $43.68 as Q4 results disapointed on the top line as bad debts continue to be a concern and there was surprise that despite the repayment of TARP (toxic asset relief programme) in 2009, the dividend was not increased. Under Jamie Dimon's leadership this is one of the stronger U.S. financial instritutions and will be looking to buy in on any continued weakness.
FALKLAND OIL AND GAS (FOGL) - The share continues to sharply move up , finishing the week at 168p, a climb of over 20% as Falkland Islands hysteria begins. Some profits taken but holding on deep water rig news or agreement to share Ocean Guardian Rig with Desire Petroleum.
BORDERS AND SOUTHERN PETROLEUM (BOR) - The company holds a 100% interest in five production licences in the South Falkland Basin. In November Borders & Southern raised £113m, enough to finance the drilling of three wells. Is is likely to share a rig with fellow south basin explorer, Falkland Oil & Gas. This is partly because Borders & Southern‘s licences are in the deep waters to the south, but also because Desire and Rockhopper have already secured their rig. Position initiated at 66p.
GW PHARMA (GWP) - Position increased. Price now 93p. Awating news on European approval of lead product, Sativex
ITV (ITV) - Position initiated at 55p with positive momentum in media stocks and turnaround story under Archie Norman.
NIGHTHAWK (HAWK) - Holding with drilling news from Jolly Ranch and Revere projects still expected shortly.
AMGEN (AMGN) - The stock traded in a narrow $55-57 range this week after guiding down estimates for 2010 earlier in the week. Holding on news of osteoporosis drug, Prolia in Europe.
MICRON (MU) - Have traded MU, selling several times above $10.8 and have bought back at $10.1. With memory chip prices improving, Micron is postioned well for the semiconductor recovery.
JP MORGAN (JPM) - Position sold Thursday prior to Friday results. JPM finished down 2.26% at $43.68 as Q4 results disapointed on the top line as bad debts continue to be a concern and there was surprise that despite the repayment of TARP (toxic asset relief programme) in 2009, the dividend was not increased. Under Jamie Dimon's leadership this is one of the stronger U.S. financial instritutions and will be looking to buy in on any continued weakness.
FALKLAND OIL AND GAS (FOGL) - The share continues to sharply move up , finishing the week at 168p, a climb of over 20% as Falkland Islands hysteria begins. Some profits taken but holding on deep water rig news or agreement to share Ocean Guardian Rig with Desire Petroleum.
BORDERS AND SOUTHERN PETROLEUM (BOR) - The company holds a 100% interest in five production licences in the South Falkland Basin. In November Borders & Southern raised £113m, enough to finance the drilling of three wells. Is is likely to share a rig with fellow south basin explorer, Falkland Oil & Gas. This is partly because Borders & Southern‘s licences are in the deep waters to the south, but also because Desire and Rockhopper have already secured their rig. Position initiated at 66p.
GW PHARMA (GWP) - Position increased. Price now 93p. Awating news on European approval of lead product, Sativex
ITV (ITV) - Position initiated at 55p with positive momentum in media stocks and turnaround story under Archie Norman.
NIGHTHAWK (HAWK) - Holding with drilling news from Jolly Ranch and Revere projects still expected shortly.
Tuesday, January 5, 2010
Update on portfolio - January 5th 2010
Nighthawk Energy (HAWK)
Average buy price 35p. Currently 35.75p to sell. Hold with news from Revere and Jolly Ranch project imminent.
Coal of Africa (CZA)
Average buy price 99p. Currently 115p to sell. Rising South African Coal prices driven by strong Indian Subcontinent demand have moved the share price up from the £1 level. Further news on Vele project and move from AIM to main market are catalyts for further share price appreciation. Holding.
Desire Petroleum (DES)
Buy at 85p. Sold at 108p. Placing and open offer deadline extended to January 11th. Open offer at 70p means that shares may well be sold on receipt which may depress share price during mid January. Watching for possible re-entry.
Falkland Oil and Gas (FOGL)
Buy at 132p. Holding at 128p.
JP Morgan Emerging and Templeton Emerging.
Short positions closed at loss due to continued strength in Emerging markets stocks.
Micron Technology (MU)
Buy at $10.3 closed at $11. Share on watch for repurchase.
Amgen
Average buy at $57.5. Currently at $57.8. Holding due to imminent drug approval news.
GW Pharma (GWP)
Buy at 84.5. Currently 88p to sell. Holding with European Medicines Review agency due end January. Approval of Sativex lead drug likely Q1 2010.
Average buy price 35p. Currently 35.75p to sell. Hold with news from Revere and Jolly Ranch project imminent.
Coal of Africa (CZA)
Average buy price 99p. Currently 115p to sell. Rising South African Coal prices driven by strong Indian Subcontinent demand have moved the share price up from the £1 level. Further news on Vele project and move from AIM to main market are catalyts for further share price appreciation. Holding.
Desire Petroleum (DES)
Buy at 85p. Sold at 108p. Placing and open offer deadline extended to January 11th. Open offer at 70p means that shares may well be sold on receipt which may depress share price during mid January. Watching for possible re-entry.
Falkland Oil and Gas (FOGL)
Buy at 132p. Holding at 128p.
JP Morgan Emerging and Templeton Emerging.
Short positions closed at loss due to continued strength in Emerging markets stocks.
Micron Technology (MU)
Buy at $10.3 closed at $11. Share on watch for repurchase.
Amgen
Average buy at $57.5. Currently at $57.8. Holding due to imminent drug approval news.
GW Pharma (GWP)
Buy at 84.5. Currently 88p to sell. Holding with European Medicines Review agency due end January. Approval of Sativex lead drug likely Q1 2010.
Sunday, December 27, 2009
Update on portfolio 27th December 2009
Coal of Africa (CZA): Has risen to £1.00, following buy at 95p, as South African Coal prices for export continue to rise. News on Vele Mine approval still awaited with anticipation.
NightHawk Energy (HAWK): Bought at 35p. After slipping as low as 30p, has stabilised at 33p. News on Jolly Ranch lateral wells and waterflooding at Revere anticipated in early January. News flow should drive signficiant momentum in this stock. The recent takeover of XTO energy by Exxon shows the potential valuations of shale oil/gas plays. An exciting stock to hold for 2010.
Desire Petroleum (DES) and Falklands Oil and Gas (FOGL): Desire purchased at 85p, now at 86p and FOGL at 131p, now at 128p. The Ocean Guardian Rig has reached Las Parmas.
Next leg:
Las Palmas- Recife, Brazil: 2,860 nm @ av. 4.5 kn = 26 days = ETA Recife 19/20 Jan
Last leg:
Recife-FI 1st location: 2,470 nm @ av. 4.5 kn = 23 days = ETA FI [1st location] 12 Feb 2009
@ av. 5 kn = 21 days = ETA FI [1st location] 6 Feb 2009
Amazon (AMZN): Short set at $146. Now at $138. Short closed
Short Dollar/Euro: Euro shorted at 1.51. Short closed at 1.47. Now at 1.43.
Short emerging markets: Shorts placed on JP Morgan Emerging and Templeton Emerging. Both investment trusts have risen since the short. Given momentum in this sector, watching closely with a view to close.
Sunday, November 29, 2009
NightHawk Energy - a shale oil bet with huge potential!
At 35p, AIM listed Nighthawk energy (HAWK) is a very interesting play on shale oil in the U.S. and with its share price currently depressed, there looks to be a strong investment case for signficant gains in 2010 driven by news flow.
The case for investment:
1. THE JOLLY RANCH PROJECT
Nighthawk owns a 50% share in the Jolly Ranch Project in Colorado (its U.S partner Running Foxes owns the remainder). Hawk owns approximately 400,000 acres in the SE part of the Denver Basin. The hope is that oil can be produced from its black organic shales.
In July 2009, Schlumberger Data and Consulting Services, completed a survey of the oil in place at Jolly on an area of 246,000 acres.
The results were highly encouraging:
P10 - 1.22 billion barrels
P50 (most likely oil in place) - 1.46 billion barrels
P90 - 1.742 billion barrels
Schlumberger concluded that " the regional continuity of the formations was such that the resources in place were likely to be laterally continuous across the total acreage".
Hawk's efforts to date has been focused on proving the reserves in place and recovery rates using a combination of traditional vertical wells and a newer technique known as Lateral or horizontal Drilling. During the second half of 2009, it has been shown that oil recovery has been economic from several of these wells e.g. Craig 4-4, 65 barrels per day.
What is horizontal drilling?
The use of horizontal drilling technology in oil exploration, development, and production operations has grown rapidly over the past 10 years. Horizontal drilling technology achieved commercial viability during the late 1980’s and It has been used successfully particularly in the Bakken Shale of North Dakota and the Austin Chalk of Texas, Of the three major
categories of horizontal drilling, short-, medium-, and long-radius, the medium-radius well has been most widely used and productive. Achievable horizontal bore hole length grew rapidly as familiarity with thetechnique increased; horizontal displacements have now been extended to over 8,000 feet. The technical objective of horizontal drilling is to expose significantly more reservoir rock to the well bore surface than can be achieved via drilling of a conventional vertical well. Significant successes include many horizontal wells drilled into the fractured Austin Chalk of Texas’ Giddings Field, which have produced at 2.5 to 7 times the rate of vertical wells, wells drilled into North Dakota’s Bakken Shale, from which horizontal oilproduction increased from nothing in 1986 to account for 10 percent of the State’s 1991 production, and wells drilled into Alaska’s North Slope fields.
Comparisons to the Bakken field
The Bakken Formation, occupying about 200,000 square miles (520,000 km2) of the subsurface of the Williston Basin, covering parts of Montana, North Dakota, and Saskatchewan.
There are significant reservoirs of oil in the Bakken shale. Oil was first discovered in the Bakken in 1951, but efforts to extract it have historically met with difficulties. An April 2008 USGS report estimated the amount of technically recoverable oil in the Bakken Formation at 3.0 to 4.3 billion barrels (680,000,000 m3), with a mean of 3.65 billion.The state of North Dakota also released a report that month which estimated that there are 2.1 billion barrels (330,000,000 m3) of technically recoverable oil in the Bakken.
Geologically, Jolly Ranch is similar to the Bakken shale field which is currently the largest shale play in N. America . Because the Bakken shale has generally low porosity and low permeability, it made the oil difficult to extract and until recently recovery rates were poor and it was the advent of the new horizontal drilling techniques that has signficantly increased recovery rates. Jolly appears to have superior porosity and permeability characterisitics and this geology together with the promising early drilling results give credence to the theory that Jolly could be more productive than Bakken in the longer term.
Bakken fields have attracted strong prices per acre e.g. Jan 08 Crescent point/londex $17,000 per acre, Dec 08 Cpe/vilanum $7398 per acre, March 09 tristar/cpe $9332 per acre.
Jolly Ranch financial models based on Schlumberger anaylsis
- p10 oil in place estimates (Schlumberger July 2009)
- 10% recovery rate
- 25% cost per barrel
- $55 per barrel oil price - WTI
Estimated earnings for the life of the project are $2.35 billion, which equates to lifetime earnings per share of $72 (£45).
2. Financial health
In August 2009, Nighthawk raised US$37 million (£22.4 million) at 35 pence per share via an institutional placing. Cash balances of 30th June 2009 were $6 million. At the AGM in November, David Bramhill (MD) stated that if oil stayed close to the current $75/barrel level, the company would continue to be cash flow positive and as production ramps up (expected to be 700-800 BPD by end 2009), cash flow would continue to improve. Nighthawk is currently debt free and the board is clearly of the opinion that equity is advantageous to bank debt. It is unlikely that a further placing of shares will be necessary until the end of 2010 and the financial position is helped because Running Foxes contribute 50% towards all costs as well as sharing 50% of all revenues.
3. Other prospects.
As well as Jolly Ranch, Hawk also has an interest in the Revere prospect. This is a 40,000 acre waterflood project and is located on or around the State border between Kansas and Missouri. It is comprised of the Devon Oilfield (80% interest), Buchanan, Worden and Xenia projects (50% interest).
The reservoir is underpressurised, therefore it is not possible for oil to reach the surface without water injection which displaces the oil in the well. This is a well used technique called Waterflooding.
Initial gas production from Xenia is expected to be 500,000 cu ft per day plus oil. In addition the P50 (most likely) of the Devon, Buchanan and Worden sections of Revere has been calculated to be 210.5 million barrels. This is expected to increase as further deveopment occurs.
Nighthawk also own interests in smaller projects, Cisco Springs (50% owned) and the Cliffs shale gas project (80% owned).
4. Attractive share price below 40p
Nighthawk's current share price of 35p, gives it a market capitalisation of £116 million (329,639,480 ordinary shares). This is equivalent to the institutional placing price of 35p which occurred in August 09. The 52 week share price range is 22p to 59p (the 59p coinciding with the release of the Schlumberger data in July 2009).
At the November AGM, David Bramhill (MD) stated that the share had been depressed by some institutional selling and this stock overhang as well as short term profit taking by private investors has moved Hawk's price down from the mid 45p range prior to the AGM to the current 35p. Certainly the news from the 2009 AGM that the company was producing only 250 BPD compared with an expectation of closer to 2000 BPD declared at the 2008 AGM made investors feel that this was "jam tomorrow" story and drove a lot of shorter term speculators out. Production expected at the end of 2009 is closer to 850 BPD. However, investors should buy Hawk as a "production proving" play not a producer with an expectation of signficant news in Q1 2010:
- Production updates from the Jolly Ranch wells
- Production updates from the Revere Waterfloods and Xenia gas project
5. Moderate risk profile
Although recovery rates are being proved at Jolly Ranch, the Schlumberger assessment gives confidence that there is a signficant quantity of oil contained within the shale rock. Given development in horizontal drillig technology which has been succesfully applied in the Bakken, recovery prospects are encouraging.
The fact that this is a play in the United States cannot be underestimated. Infrastructure for the transport of oil and gas is good and geopolitcal risk is low. Cost of extraction is also low relative to deep water projects in the Gulf of Mexico, the Falkland Islands or Santos basin off Brazil.
6. Listing of ADR's on U.S. Market
Nighthawk was listed as a level 1 American Depository Receipt in November 2009 giving U.S. investors easier access to purchasing shares.
7. No sale of stock options by directors
It should be noted that the following options for Directors of the company vested on the following dates:
The directors have not yet exercised these options at current share price levels. Though no directors have purchased, it gives confidence that the directors have not taken early profits.
8. Rumours of takeover
There have been some rumours of a bid for Nighthawk circulating. None of these have been confirmed but they may add spice to the share price. Competitors have been buying up land around Jolly Ranch so it is not inconceivable that a buyout may occur, but probably later in 2010 or 2011.
Although recovery rates are being proved at Jolly Ranch, the Schlumberger assessment gives confidence that there is a signficant quantity of oil contained within the shale rock. Given development in horizontal drillig technology which has been succesfully applied in the Bakken, recovery prospects are encouraging.
The fact that this is a play in the United States cannot be underestimated. Infrastructure for the transport of oil and gas is good and geopolitcal risk is low. Cost of extraction is also low relative to deep water projects in the Gulf of Mexico, the Falkland Islands or Santos basin off Brazil.
6. Listing of ADR's on U.S. Market
Nighthawk was listed as a level 1 American Depository Receipt in November 2009 giving U.S. investors easier access to purchasing shares.
7. No sale of stock options by directors
It should be noted that the following options for Directors of the company vested on the following dates:
- 4,500,000 shares , exercise price 7p, earliest vest date 15/8/09
- 500,000 shares, exercise price 7p, earliest vest date 25/9/09
- 500,000 shares, exercise price 12p, earliest vest date 11/12/09
- 1,250,000 shares, exercise price 53p, earliest vest date 1/11/07
The directors have not yet exercised these options at current share price levels. Though no directors have purchased, it gives confidence that the directors have not taken early profits.
8. Rumours of takeover
There have been some rumours of a bid for Nighthawk circulating. None of these have been confirmed but they may add spice to the share price. Competitors have been buying up land around Jolly Ranch so it is not inconceivable that a buyout may occur, but probably later in 2010 or 2011.
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